How to maximise your SMSF
1:23

David Koch tells you what's needed to help manage your super fund like a pro.

news.com.au

01 Jul 2014

Lifestyle/Money Saver HQLifestyle/Money

Superannuation is such a complex area it makes sense to get experts on board.Source: Getty Images

SELF-managed super funds are the fastest growing sector in the superannuation industry.

The latest figures from the Australian Taxation Office show the number of SMSF members topped one million for the first time March, holding a whopping $547 billion in net assets.

But it’s not all wine and roses. As the trustee of an SMSF, you’re responsible for everything from regulatory compliance to paying benefits. This makes good management essential.

To sharpen up your approach, here are our four tips for managing an SMSF like a pro.

TAKE AN ACTIVE INTEREST

Being trustee requires much more than sound knowledge of financial markets or a knack for picking stocks. You’re required to run the fund to provide for its members in retirement.

This means setting the fund’s investment strategy, organising insurance, complying with relevant legislation and managing the administration, among other things.

Needless to say, taking an active interest is crucial.

Graeme Colley, director of professional standards at the SMSF Professionals’ Association of Australia, recommends trustees learn as much as possible about their fund and the industry in general, and budget to spend time each week on administration and upkeep.

How long exactly will depend on the complexity of the fund, the investment strategy and other factors.

You may think you’re a savvy investor and invest like a pro … but are you? Especially when your entire retirement lifestyle depends on the quality of your decision making. It’s a scary prospect.

Good investment managers:

* Set a strategy and have the discipline to stick to it.

* Base their decisions on detailed research and objective analysis — they take out the emotion.

* Use other experts and fund managers to plug any of their weaknesses.

* Never take unnecessary risks — they don’t “bet the farm” on a risky investment.

Ask yourself whether you can stick to these fundamentals.

SHARPEN UP YOUR DOCUMENTATION

Keeping paperwork accurate and up to date is one of the most important tasks when managing your own super fund. And to keep you honest, SMSF regulations are set and enforced by the Australian Taxation Office.

Every year there are a range of reporting requirements that the trustee has to fulfil, including lodging an annual return, paying the SMSF supervisory levy, maintaining comprehensive records and engaging an ASIC registered auditor.

Penalties for noncompliance with any aspects can be severe and include fines, loss of super tax concessions and freezing of assets.

And there are member implications too. Colley says that there’s been an increase of SMSF litigation appearing before the courts, generally because invalid documentation has led to uncertainty around who should be entitled to a benefit from the fund.

This is essential legal stuff that you’ve just got to be across.

STAY ON TOP OF REGULATORY CHANGES

It’s crucial to be across any changes to relevant super legislation that impact your legal obligations. Especially as super’s a complex and highly regulated area that‘s been tweaked countless times by successive governments.

The ATO and ASIC websites are a good source of information on super in general and any changes that are coming through. And, of course, pick up the financial press, both for super updates and to inform investment decisions for the fund.

Your accountant, financial adviser and industry figures are other great sources of information, so check if they have a regular newsletter and get on the distribution list.

KNOW WHEN TO SEEK PROFESSIONAL ADVICE

In such a complex area it makes sense to get experts on board.

A specialist accountant is well-placed to set up and structure your SMSF and can help in drawing up annual reports, record keeping and much of the other admin.

Once the fund is established, a financial adviser can play a pivotal role in helping set an appropriate investment strategy for the fund. They can also assist with issues like transitioning to retirement, not exceeding contribution caps, insurance and investing in alternative assets.

In certain situations it may be necessary to consult a lawyer, particularly around issues like estate planning or changes to important documents like the trust deed.

It sounds simple, but getting these crucial aspects right is what the pros do well and is central to how quality funds perform.

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